NATIONAL BANKING UNDER THE FEDERAL RESERVE SysTEM 
The Federal law is construed as requiring payment of national 
bank capital, either original or on account of increase, in cash. 
Hence, in the case under discussion, the right of the continuing bank 
to accept stock or assets representing stock of the liquidating bank, 
and to issue therefor certificates of stock in the continuing bank is 
not recognized. 
Since it is illegal for a bank to transfer or hypothecate its Federal 
Reserve Bank shares, the liquidating bank which figures in a con- 
solidation must surrender its Federal Reserve stock and the bank 
resulting from the merger must apply for new stock. As to the 
allotment of stock when a national bank increases its capital, Federal 
law makes no provision. An analysis of the common law covering 
such cases is given under “Capital,” page 44 and 45. 
8. Consolidation with both banks liqguidating—Both banks party to 
a proposed consolidation may be placed in voluntary liquidation, 
then organize anew under a different corporate title and the new bank 
acquire, in the manner outlined previously in this chapter, the assets 
and liabilities of the liquidating banks. This method enables the 
incorporators to place the stock as they desire. A contract covering 
the taking over of the liquidating banks’ assets and liabilities must 
be made, and an examination of the assets to be purchased will be 
made by a national bank examiner at the expense of the new bank. 
A bank which is in good faith closing its affairs for the purpose 
of consolidating with another national bank, is not required to deposit 
lawful money for its outstanding circulation, providing transfer of 
the securing bonds is properly authorized, and the circulation lia- 
bility assumed. 
Prior to the passage of the McFadden Act of February 25, 1927, a 
State bank could not under the law be consolidated directly with a 
national bank. To effect such a consolidation it was necessary for 
the state bank first to become a national bank, either by reorganiza- 
tion or conversion, in order that consolidation might be effected be- 
tween two national banks as provided for by the amendment to the 
National Bank Act of November 7, 1918 just described (see section 1 
above). The recent legislation provides for direct consolidation 
between a national and a state bank without the necessity of inter- 
mediate steps. The requirements and procedure are in general the 
same as for the consolidation of two national banks( see section 1 
[ 
59 |